Covid 19 - Furloughed workers and claiming back 80% of the wage costs

The Coronavirus Job Retention Scheme is available to all UK businesses. This is where HMRC will reimburse 80% (capped at £2,500.00 per employee) of the wage costs relating to any furloughed workers. Many of you by now will understand what is meant by a furloughed worker, but for those that don’t, a furloughed worker is a member of staff that is available to work but there is no work for them. The scheme is for those employees whom you would otherwise have made redundant.

I just wanted to highlight a few issues that have come to light since this was first announced:

An employee is only furloughed if they have no work available. That means they cannot come back in throughout their furloughed period even to fulfil 5 minutes of employee duties. If an employee did complete any form of work, no matter how little, they wouldn’t qualify for the Job retention Scheme and the business wouldn’t receive any reimbursements.

Unless your contracts of employment have a ‘Lay-off’ clause which allows you to send employees home without pay, employees are legally entitled to 100% of their salary. Therefore if you were only thinking of paying the 80% to your employees and they don’t have that clause in their contracts, you need to negotiate the reduced pay.

If you cannot come to an agreement or the business doesn’t have the funds the other option is redundancy.

Zero hour contracts and casual workers are another area. With these you wouldn’t need to negotiate

Directors/personal service companies. It has not been clarified whether the 80% applies to them yet but HMRC have mentioned there needs to be no activity. We fear they may argue a director always works. We are hoping they give us further guidance when they cover self-employed workers in this evening’s announcements.

Discrimination. If you are in a position where the vast majority of your work has dried up but there is still some work to be done, be careful not to be discriminating on who you choose to furlough and who to keep on. This could be the case even if you picked say a person of high risk.

Finally timing. We think clients should furlough as soon as possible. That 1st of March date is, we think, to cover workers already laid off that day and later, before the announcement was made on the 20th of March. It may well be the case that the 80% only kicks on when you furlough the staff member. So if an employee were laid off on the 1st of March, you can backdate the grant claim for that individual to the 1st of March. For someone laid off on the 25th of March, we suspect you get the 80% from the 25th.

As you can see it can be tricky so if you subscribe to an employment law service make sure you take their advice in how to apply the process to your particular firm and circumstances. If you don’t use an employment law service, take legal advice.

One more thing to consider is if there are any recurring admin duties, for example where you process your own payroll or bookkeeping. If an employee is furloughed, to get the 80% government support they wouldn’t be able to complete those duties next month. If that is the case and you want to discuss alternative options or need any further clarification on any of the above, please get in touch with Michael (Michael@sidaways.co.uk)